The WACC of Soprano Oyj (SOPRA.HE) is 6.4%.
| Range | Selected | |
| Cost of equity | 5.30% - 8.40% | 6.85% |
| Tax rate | 20.00% - 20.00% | 20.00% |
| Cost of debt | 7.00% - 7.60% | 7.30% |
| WACC | 5.4% - 7.4% | 6.4% |
| Category | Low | High |
| Long-term bond rate | 0.3% | 0.8% |
| Equity market risk premium | 5.6% | 6.6% |
| Adjusted beta | 0.81 | 1.01 |
| Additional risk adjustments | 0.5% | 1.0% |
| Cost of equity | 5.30% | 8.40% |
| Tax rate | 20.00% | 20.00% |
| Debt/Equity ratio | 0.8 | 0.8 |
| Cost of debt | 7.00% | 7.60% |
| After-tax WACC | 5.4% | 7.4% |
| Selected WACC | 6.4% | |
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for SOPRA.HE:
cost_of_equity (6.85%) = risk_free_rate (0.55%) + equity_risk_premium (6.10%) * adjusted_beta (0.81) + risk_adjustments (0.75%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.